Overstock.com 2015 Annual Report Download - page 95

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At December 31, 2015, we held noncontrolling interests (less than 20%) in three privately held entities. The total aggregate amount of our three
investments was $7.0 million and the investments are recognized as cost method investments included in Other long-term assets in our consolidated balance
sheets. Earnings from the investments are recognized to the extent of dividends received, and we will recognize subsequent impairments to the investment if
they are other than temporary. We review these investments individually for impairment by evaluating if events or circumstances have occurred that may
have a significant adverse effect on their fair value. If such events or circumstances have occurred, we will then estimate the fair value of the investment and
determine if any decline in the fair value of the investment below its carrying value is other-than-temporary. At December 31, 2015, the carrying amount of
the investments was $7.0 million. We recognized no impairment losses during the years ended December 31, 2015 and 2014.
During 2014, we formed Medici Inc., doing business as tØ.com, to develop fintech and crypto software products and intellectual property including
proprietary blockchain software and other future businesses, and own the fintech and software, which we refer to collectively as the tØ technology or the tØ
software. Also during 2014, we acquired a 24.9% interest in Pro Securities LLC, a broker-dealer operating a registered alternative trading system or ATS,
which we subsequently contributed to Medici in connection with its efforts to develop the tØ technology. The initial purchase price for the investment was
$250,000 and is accounted for as an equity method investment included in Other long-term assets in our consolidated balance sheets.
At December 31, 2015, the difference between the carrying value of our investment in Pro Securities and the amount of underlying equity in net
assets of the investee was not significant. Our proportionate share of the net income or loss of our equity method investee for the years ended December 31,
2015 and 2014 was not significant. When we record our proportionate share of net income, it increases income (or decreases loss) in our consolidated
statements of income and our carrying value in that investment. Conversely, when we record our proportionate share of a net loss, it decreases income (or
increases loss) in our consolidated statements of income and our carrying value in that investment.
tØ.com has licensed tØ technology on a non-exclusive basis to Pro Securities LLC. tØ.com is an entity that is 81% owned by us and 19% owned by
current employees of Medici. This entity is included in our consolidated financial statements. Intercompany transactions with the entity have been
eliminated and the amounts of contributions and gains or losses that are attributable to noncontrolling interests are disclosed in our consolidated financial
statements. During the year ended December 31, 2015, we purchased an additional 5.9% interest in tØ.com (for a total ownership interest of 81%). During the
year ended December 31, 2015, Medici also entered into an agreement to acquire the remaining 75.1% interest in Pro Securities (for a total ownership interest
of 100%) as described in Note 3—Acquisitions, Goodwill, and Acquired Intangible Assets.
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We account for lease agreements as either operating or capital leases depending on certain defined criteria. In certain of our lease agreements, we
receive rent holidays and other incentives. We recognize lease costs on a straight-line basis without regard to deferred payment terms, such as rent holidays,
that defer the commencement date of required payments. Additionally, tenant improvement allowances are amortized as a reduction in rent expense over the
term of the lease. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the life of the lease, without
assuming renewal features, if any, are exercised.
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We account for treasury stock under the cost method and include treasury stock as a component of stockholders’ equity.
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Our precious metals consisted of $5.7 million in gold and $4.0 million in silver at December 31, 2015 and $6.3 million in gold and $4.6 million in
silver at December 31, 2014. We store our precious metals at an off-site secure facility. Because these assets consist of actual precious metals, rather than
financial instruments, we account for them as a cost method investment initially recorded at cost (including transaction fees) and then adjusted to the lower of
cost or market based on an average unit cost. On an interim basis, we recognize decreases in the value of these assets caused by market declines. Subsequent
increases in the value of these assets through market price recoveries during the same fiscal year are recognized in the later interim period, but may not
exceed the total previously recognized decreases in value during the same year. Gains or
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